Summary Economic Global Governance Notes

Economic Global Governance Notes



The Bretton Woods Conference

 The need for more effective economic Global governance was seen close to the end of WW2 at
the Bretton Woods conference, held in 1944
 The 44 nations of the WW2 allies met to consider how the world financial systems and trade
could be managed in peacetime
 Many of today's Global economic governance institutions were founded at the conference
- IMF
- World Bank


Aims of the Bretton Woods conference

 To create an agreed system of rules for international economic matters, including World Trade
 To stabilise world currencies and reduce wild fluctuations in the value of currencies
 To prevent a repeat of the Great Depression that occurred in the 1930s
 To bolster capitalism against the rise of communism as a competing economic model in the
Soviet Union


Economic Global Governance IGOs and arrangements

 IMF (1947)
- Establish the US dollar as the basis against which all other states currencies would be
valued
- This stabilised world currencies from major fluctuations in their value

 World Bank (1946)
- Aim is to provide a pool of investment for middle income states

 World Trade Organisation (WTO) (1947)
- International forum in which states can make deals and international rules on trade

 Collectively, these institutions and the principles on which they were founded are known as the
Bretton Woods system
 Refers to the forums and institutions of Global economic governance that states have put in
place to manage the Global economy




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,Global cooperation on economic governance

In the more recent decades, Global cooperation on Economic governance has focused on the following:

1. Poverty/development
 Value of international coordination through the UN and other forums has progressed
considerably
 Developing states have increased spending on development
 MDGs represent the most coordinated effort of IGOs and states to work towards common
development targets

2. Free trade
 There has been an increase in multilateral free trade agreements
- Single market of the European Union
- North American free trade agreement (NAFTA) between Canada, Mexico, and the USA

3. Single currency
 The economic debate in the EU in the 1990s focused on developing a single currency - the euro
- Euro came into circulation in 2002
- It is now the currency of 19 of the 27 EU member states
 Most economic Global governance in Global politics is Inter governmental in nature, but the
eurozone countries have agreed to strict economic rules and given up significant freedom to
make economic decisions nationally
- Such as setting their own interest rates
- Power is with super national institutions such as the European central bank

4. Forums
 There is a need for a forum of discussion and decision-making to enable states to resolve
international economic crisis
 Global financial crisis of 2008 posed a particular challenge for economic ideas, notably the IMF
 In response to the crisis, the IMF dramatically increased the loans it makes to bailout failing
economies


Actors in economic Global governance

1. IGOs
 The World Bank
 The IMF
 UN (Including the UN development programme – UNDP)

2. Informal intergovernmental forums
 G7/G8 and the G20 - includes the most industrialised States and the biggest Global economic
powers




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, 3. Multinational corporations (MNCs)
 Privately owned companies that operate in more than one state

4. Multilateral forums
 World Economic Forum (WEF)
 Provides an opportunity for world leaders, IGOs, business leaders, NGOs, and economists to
discuss the challenges facing the Global economy


The International Monetary Fund

 One of the key Global economic governance institutions, agreed at the Bretton Woods
conference
 Became fully operational in 1947
 Headquarters are in Washington DC


Role of the IMF in the 1940s

 To encourage stability in world exchange rates
 During the Great Depression, many currencies had been devalued, causing great uncertainty
and ultimately deep economic recession
 IMF oversaw a system of fixed exchange rates, linked to the US dollar, which in turn was fixed
to the price of gold
 This system brought much increased ability and prevented unsettling fluctuations in currency
 State and traders knew how much currency was worth, and could make investments with
greater degree of stability
 Fixed exchange rate system broke apart in 1971 when Nixon abandoned the fixed link between
the value of the US dollar and gold
 Decision reflected the USA’s desire to have greater flexibility over the value of its currency


Current role of the IMF

 Provides economic stability by giving financial support or loans to states that are suffering, or
likely to suffer from debt crisis
- Debt crisis: when a state is unable to repay loans that it owes to financial institutions such
as the IMF or private banks
- Predominantly seen the IMF focusing on the developing world, but it has also made loans
to developed countries
- In 1976, the UK borrowed 3.9 million US dollars from the IMF as it struggled to deal with a
deep financial crisis
- Greece, Portugal, and Spain have received IMF loans in order to help save their economies
from bankruptcy



 Monitors the economic outlook of both the world economy and individual member countries

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